Accel Entertainment (ACEL) Q2 FY26 earnings call: guidance and Q&A

Will Accel's market share in Chicago remain higher than its statewide average, given the initial 44% approval rate?

Management expects their market share in Chicago to eventually align more closely with their statewide average, around the 30% mark, as the market rolls out over time.

“I'd say that we probably will have relatively close market share in the city as we do in the state relationships in Chicago will roll out over time. And I wouldn't expect a big difference between the 2 licensees.”

asked by Patrick Keough · answered by Mark Phelan

Once Chicago is live, will the application and approval process accelerate, or are there further political hurdles?

Management believes that once the market opens, there will be a more normal flow of applications, and they do not foresee additional hurdles, considering the current stage as the 'last hurdle'.

“I think that once the doors open or the gates open, you'll have a more normal flow of applications. I think there's a lot of people kind of waiting to see what it looks like. I don't expect additional hurdles. It's -- it's getting started, and we're really close to that starting point. And whether it's weeks or a couple of months, we don't know, but there isn't additional hurdles that we foresee at this point. This is the last hurdle.”

asked by David Bain · answered by Andrew Rubenstein

Given the sequential growth in Illinois location count, is the pruning cycle ending, or how should future location count be viewed?

Management reiterated that their focus is on the quality of locations rather than absolute growth. They continue to optimize the portfolio by adding higher-performing locations and removing lower-volume or unprofitable ones, which improves margins per gaming machine.

“As Andy said in his initial remarks, we really don't focus on the absolute growth of the location count. It's just the quality. I think you see that in the numbers in this quarter. Generally, what we see is the locations that close independently based on their own performance. Their general gaming performance is lower than the locations we bring on. So overall, the margins are increasing per gaming machine, and we continue to do that, and we're optimistic that, that trend will just improve over time.”

asked by Jordan Bender · answered by Mark Phelan

What is the strategic rationale behind owning the Rice Palace property outright, and is ownership of larger locations a priority in permitted markets?

Management stated that in Louisiana, where gaming is centered around truck stops with up to 60 machines, owning and managing these properties is currently in their best interest. They are excited about the acquisition and see further opportunities in the state.

“So Rice Palace Truck Stop in Louisiana, the gaming business down there is centered around truck stops. They can host up to 60 game machines per location. It's just those machines, no table games. And we think right now, it's definitely in our best interest to own these types of properties and manage them according to our own wishes and plans. But we're really excited about this acquisition. And as we said earlier, we think there are other opportunities in that state to use our scale to improve our future earnings power.”

asked by Maxwell James Marsh · answered by Mark Phelan

What is the estimated total market size for establishments in Chicago, given the initial licenses granted?

Management estimates the Chicago market is probably worth about $1 billion in total revenue, with approximately one-third going to terminal operators. They also noted that it would likely take 5-plus years for the market to be fully deployed.

“Yes. I mean what we've said in the past, and I don't think this -- right now, we don't have any other insight to change this is that given the population of Chicago relative to the population of the state and kind of the trend right now in the state, it's probably worth about $1 billion in total revenue. And then obviously, the amount that the different TITOs get is about 1/3 of that, and then that gets divided up amongst all the players in the industry. So right now, we don't see that being any different in terms of the outlook that we have.”

asked by Gregory Gibas · answered by Mark Phelan

Are the Q3 trends for Illinois statewide VGT growth returning to GDP-plus levels, or maintaining the higher growth seen in Q2 FY25?

Management stated that July results were relatively consistent with what was observed in the first half of the year, without providing specific forward guidance.

“Yes. As you know, we don't provide forward guidance. But I think we could safely say that July results were relatively consistent with what we saw in the first half of the year. Does that make sense?”

asked by David Bain · answered by Mark Phelan

What is the opportunity in Pennsylvania, and what are the common denominators for political will changing to expand gaming?

Management noted the Supreme Court decision making skill gaming illegal in PA and expressed optimism for either VGT expansion or skill games becoming legal. They find it very hard to predict the political will for gaming expansion, as it's often influenced by many factors and can be blocked by a single influential person.

“David, it's Mark. In regards to the first question, it's well known that the Supreme Court decided that the skill gaming market there was illegal and they had 120 days to remove their games. We're still in that period. There's a lot of sort of dynamics in that state that could influence the ultimate outcome. We're optimistic that either skill games or VGTs -- well, VGTs are already legal, so they get expanded or skill games become legal. I can't really handicap any of the outcomes. It's, like I said, multifactor outcome. So -- but we are optimistic that maybe there will be an expansion of regulated legal route gaming there.”

asked by David Bain · answered by Mark Phelan

What is the status of TITO player adoption, and what are its effects on demand and operating costs?

TITO rollout is complete and positively received by customers. It has led to a reduction in total cash held in the field, improving working capital. While it lowers friction, quantifying its direct impact on revenue generation is difficult, though it is believed to be influencing sales.

“Thanks, Max. Yes. So I would say a couple of things. One, it is fully complete in terms of customer feedback and that sort of thing. Anecdotally, it's positively received. Obviously, we don't like poll for that or anything, but it's anecdotally well received. In terms of the benefits to the business, very clearly, we have a benefit to cash. It has been a reduction in total cash of the company. In terms of what's out in the field versus what's available. I'm not going to quote a number on that, but that is something that we've seen kind of fall off. We want to make sure that that's consistent and trends forward, but it has been very attractive for us.”

asked by Maxwell James Marsh · answered by Mark Phelan